International Trade

Edit 0 26 …
International Economics
International Trade Notes.pdf
Very good collection of notes, cover HL and SL parts of the Int Trade Section

International Economics Revision Guide.pdf


AP Macro 5-5 Unit Summary.ppt

Table of Content:
  • 3.1 International Trade (one HL topic)
  • 3.2 Exchange Rate (Some HL extension)
  • 3.3 The Balance of Payments (some HL topics)
  • 3.4 Economic Integration (one HL extension)
  • 3.5 Terms of Trade (HL only)

Wikibooks:

Guide to Tariffs in Japan:
http://www.customs.go.jp/english/tariff/2013_1/index.htm

Powerpoints:
3.1 Free Trade and Protectionism.pdf

3.2 Exchange Rates.pdf

3.3 Balance of Payments.pdf



3.1 Free Trade and Protectionism
1 Reasons for trade and the theory of comparative advantage (Syllabus Section 4.1)


    1. Extract focused on macroeconomics (Section 2 of syllabus): Bring a hard copy of the extract that you plan to use for your second commentary to class.
    2. Watch the following videos on this topic.



2 Benefits of free trade (Syllabus Section 4.2)
AP Macro 5-1 Trade and Comparative Advantage.ppt

  • Homework Due:

  • Assessments and Activities: Free-response/problem and lecture

    • Free-response/problem: You will work cooperatively with your partner to construct a response to the following prompt.

      • England and Scotland both produce scones and sweaters. Suppose that an English worker can produce 50 scones per hour or 1 sweater per hour. Suppose that a Scottish worker can produce 40 scones per hour or 2 sweaters per hour.

        1. Which country has the absolute advantage in the production of each good? Which country has the comparative advantage?
        2. If England and Scotland decide to trade, which commodity will Scotland trade to England? Explain.
        3. If a Scottish worker could produce only 1 sweater per hour, would Scotland gain from trade? Would England still gain from trade?

    • Lecture: The benefits of free trade (PDF below)



3 : Gains from Trade and Protectionism (Syllabus Section 4.2)


  • Assessments and Activities:

    • Free-response/problem
    • now watch the follwing video to help analyse the impact of tarrif.
    • http://www.youtube.com/watch?feature=player_embedded&v=S_pvEupKScc
      now do the following activity
      1. Find a product or commodity that your country imports from abroad. Using a demand and supply diagram, illustrate the impact that free trade for this good has on your country’s economy. Discuss all stakeholders, including: domestic producers and consumers, the domestic labor force, foreign producers and foreign workers.
      2. Next assume your country’s government wishes to limit the amount of imports of the product, and imposes a tariff that cuts the number of imports in half (this can be shown on your graph). Illustrate on the same graph the impact of the tariff on the stakeholders you identified above.
      3. Discuss the impact of protectionism on allocative efficiency ( When the level of output that society demands is produced by the firms in a market. If the marginal benefit enjoyed by consumers equals the marginal cost faced by producers, allocative efficiency is achieved. Only inperfect competition will allocative efficiency be achieved in the long-run, since the price of the good equals the marginal cost of the producers. In imperfectly competitive markets, the price will always be higher than the marginal cost of the firms, indicating that resources are under-allocated towards the product.) in the domestic and in the global economy.
      4. Under what circumstances might a protectionist tariff be economically justifiable?



4: Protectionism continued... Quotas, Protective subsidies



    • Free-response/problem: You will work cooperatively with your partner to construct a response to the following prompt.

      1. Define each of the following terms: tariff and quota.
      2. Use diagrams to explain how tariffs and quotas are inefficient.

    • Lecture: Quota, subsidy and it's effect on the steak-holders


5: Calculating the effect of protectionist policies. Arguments for and against protectionism

  • Homework Due:





6: Economic integration and the WTO (Syllabus Section 3 and 3)

  • Homework Due:
  • read the attached ppt. lecture
economic integration_ibECON.pptx
economic integration_ibECON.pptx
economic integration_ibECON.pptx


  • Free-response/problem: You will work cooperatively with your partner to construct a response to the following prompt.

  • Define: Free trade area, customs union, common market and monetary union.
  • Explain the concepts of trade creation and trade diversion.

quiz:
  • Sub-section quiz review (3.1)
  • please come and see to get a copy of the past papers
    this quiz will include everything you have learned thus far including your homework questions

Related Readings



Exchange Rates (Syllabus Section 3.2)

read attached:

Read this article and watch the video http://www.pbs.org/newshour/making-sense/big-mac-index-u-s-dollar-overvalued/

Further explanation:




  • Assessments and Activities: Free-response/problem and lecture

  • Lecture: Exchange Rates (PDF below)

Homework:



Exchange rate continued

  • HWK due: revise your notes on the previous lesson and PPP question
  • Lecture
    • 3.2 PDF
  • Data response question
    • Listen to the podcast click here
      watch the video lesson, and respond to the discussion questions that follow. click here
      answer the attached questions:
      Questions:

      1. 1. Why does the Chinese Central Bank possess over $3 trillion of foreign exchange reserves?
      2. 2. What does the Chinese Central Bank do with the vast majority of the money it earns from the sale of its export that it does NOT spend on US goods? Why not keep this money in cash?
      3. 3. Why does the Chinese Central Bank manage the value of its currency, the RMB? Why not let the exchange rate be determined by the free market?
      4. 4. As the RMB is slowly strengthened against the dollar, who are the winners and losers? What impact should a stronger RMB have on the balance of trade between China and the US?

7

  • HWK: the 4 questions on exchange rate from the previous class

Lecture: Exchange rate continued- Calculating exchange rate using Linear ER equation

Classwork/HWK

Watch the following video and answer the following questions:




Questions:
  1. Exchange rates are like prices, in that they are determined by supply and demand. But not all exchange rates are allowed to float freely, since the governments or central banks of some countries actively intervene in the market for their currency to manipulate its value. Identify one policy a government or central bank could use to strengthen the value of its currency and one policy that could weaken the value of a currency.
  2. What are the benefits of having a stronger currency?
  3. What are the benefits of having a weaker currency?
  4. Which determinant of exchange rates presented in the video do you think are most attributable to the fluctuating values of currencies on foreign exchange markets, and why? Relative incomes, relative interest rates, relative inflation rates, speculation or simply the tastes and preferences of global consumers?



8 : Balance of Payments (Syllabus Section 3.3)


  • Activities:

    • Listen to the following podcast on China's accumulation of USD Podcast
    • watch the following video and answer the following questions Balance of Payment video
      • #### Why does the Chinese Central Bank possess over $3 trillion of foreign exchange reserves?
        1. What does the Chinese Central Bank do with the vast majority of the money it earns from the sale of its exports that it does NOT spend on US goods? Why not keep this money in cash?
        2. Why does the Chinese Central Bank manage the value of its currency, the RMB? Why not let the exchange rate be determined by the free market?
        3. As the RMB is slowly strengthened against the dollar, who are the winners and losers? What impact should a stronger RMB have on the balance of trade between China and the US?


Homework:

      • Define: Net exports and net capital outflow. Explain why they must be equal.
      • Explain how saving, investment and net capital outflow are related.

  • Lecture: Balance of Payments and Exchange Rates:





Section 3.2 Exchange rate quiz


Balance of Payment Problems (Syllabus Section 3.3) with will be completing section 3.3 - Higher Level - MLC - The J-curve


  • Homework for next week: (after holidays)

    • Assume that the government of Japan decides to use a loose monetary policy in order to remedy a recession.

  1. Use diagrams to explain the effect of this policy on the interest rate, level of investment, real GDP and the price level.
  2. Explain how the change in the interest rate will affect the international value of the Yen and Japan's trade balance.
  3. Explain how the change in price level will affect the international value of the Yen and Japan's trade balance.
  4. Explain how the change in real GDP will affect Japan's trade balance and the international value of the Yen.
  5. Now assume that Japan embarks on an expansionary fiscal policy, running a budget deficit. Explain how this might result in a trade deficit.



Terms of Trade (Syllabus Section 3.5) HL
  • Homework Due: Watch the following videos and come to class prepared to ask any questions you have
    • Watch this video (Defining terms of trade and explaining it in Production Possibilities)